The US trade deficit rose 6.5% last year to hit a new record high of $763.6bn (£393bn).

Fuelled by last year's rise in global oil prices and the surge in Chinese imports, it was the fifth record annual US trade deficit in succession.

The gap with China alone was $232.5bn last year, the largest imbalance the US has ever recorded with one country.

America accuses China of undervaluing the yuan to keep the price of Chinese exports artificially low.

China denies the allegations, although it currently allows the yuan to trade only within a narrow band against the US dollar.

It has pledged to allow the yuan to float more freely in the future, but says any reform would not be rushed, as it does not want to risk destabilising the export-led Chinese economy.

Slowing deficit rise

Last year the US saw exports of goods and services rise 12.8% to $1.44 trillion, while its imports gained 10.5% to $2.2 trillion, said the Commerce Department.

The US blames the value of the yuan for a lot of the problem

The deficit for December alone was $61.2bn, up from $58.1bn in November, and higher than average market expectations of $59.5bn.

Although the deficit for 2006 as a whole was a fresh record, the rate of increase - 6.5% - was a slowdown on the 17.3% rise seen in 2005.

While America's annual deficit with China gained 15.4% last year, its shortfall with Japan rose 7.2%.

Meanwhile, its deficit with the European Union was down 4.7%, helped by the higher value of the euro.

The world's largest consumer of oil, US imports rose to a record $302.5bn last year, fuelled by the price of crude hitting record highs in the summer at the time of the conflict between Israel and Hezbollah in Lebanon.